Housing prices ticked higher in all major cities during the month of June.  A rebound in Detroit housing prices was most evident.  However, as the chart below indicates, most prices were just returning to a down-trending moving average and may continue to move lower in coming months.

The chart illustrates prices of a 10-city composite.  This chart is more friendly, potentially indicating a test of the low and possibly higher prices in the future.  Charts of some specific cities still show steadily falling prices.

On the positive side, downward pressure appears to be moderating indicating the a bottom in housing prices, nation-wide, may occur soon.


The number of homes listed for sale continued to decline in July, falling by 1.2% from June and nearly 18% from one year ago.
Data from Realtor.com show that there were 2.31 million homes listed for sale at the end of July. That is the lowest level for July since the series began in 2007. Inventories tend to decline in July as the spring sales rush gives way to summer vacations. Zelman & Associates, a research firm, says July listings have typically fallen by 0.8% from June over the past 28 years.
The Realtor.com figures include sale listings from more than 900 multiple-listing services across the country.
Since 2007, inventory has only been lower in five months: the first four months of this year, and in January 2010. Housing demand has been weaker than expected for most of the year, and new worries about the strength of the U.S. economy could push the market into another stall.
Inventory levels might be even higher—putting more pressure on prices—were it not for banks holding foreclosures off the market as they revamp their foreclosure-processing infrastructure.
Compared with the previous month, July listings were down most sharply in Phoenix (-7.9%), Tampa (-6.4%), Orlando (-5.1%), Miami (-4.6%) and Atlanta (-4.6%). Listings posted the biggest gains in just three markets Denver (22.4%), Cleveland (0.9%), and New Orleans (0.2%).
The Realtor.com figures showed that median asking prices were unchanged from June to July and also from one year ago, offering a sign that home prices could resume their downward drift later this year during the traditionally slower sales months. Asking prices were up most sharply for the month in Detroit (5.4%) and Portland, Ore. (3.6%).
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Housing Starts Down Slightly in July
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August 16, 2011 - Nationwide housing starts edged down 1.5 percent to a seasonally adjusted annual rate of 604,000 units in July, according to figures released by the U.S. Commerce Department today. The slight decline comes on the heels of significant gains in housing production in June, and was attributable to a moderate drop-off on the single-family side while production of multifamily units continued upward.

"Although single-family housing production slid a few notches in July, the number was right in line with the second quarter average, so we view this report as an indication of relative stability," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. "This is in keeping with the fact that not much has changed over the past several months with regard to the outlook for new-home sales and production. Both builders and buyers continue to exercise a great deal of caution due to uncertainty about the current economic climate, the large number of foreclosed homes on the market, and concerns about access to credit."

"Overall housing production held relatively steady in July, with construction of new multifamily projects showing greater strength due to higher demand for rental units," noted NAHB Chief Economist David Crowe. "Going forward, we expect housing production to show modest improvement through the end of this year, particularly in select markets that do not have large inventories of distressed homes and where economic stability is more apparent."

Single-family housing starts declined 4.9 percent to a seasonally adjusted annual rate of 425,000 units in July, on par with their second-quarter average. Multifamily starts rose 7.8 percent to a seasonally adjusted annual rate of 179,000 units, their highest level since January.

Starts activity was mixed across the four regions in July, with the Northeast's 34.7 percent gain countered by a 37.7 percent decline in the Midwest, a 5.6 percent gain reported in the South, and a 3.0 percent decline posted in the West.

Issuance of building permits, which can be an indicator of future building activity, fell 3.2 percent to a seasonally adjusted annual rate of 597,000 units in July. While single-family permits were virtually unchanged with a 0.5 percent gain to 404,000 units, multifamily permits registered a 10.2 percent decline to 193,000 units.
Regionally, permits gained 18.3 percent in the Northeast and 3.6 percent in the South, but fell 7.1 percent in the Midwest and 7.8 percent in the West in July.

Builder Confidence Unchanged in August
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August 15, 2011 - Builder confidence in the market for newly built, single-family homes held unchanged at a low level of 15 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for August, released today.

"Builders continue to confront the same major challenges they have seen over the past year, including competition from the large inventory of distressed homes on the market, inaccurate appraisal values, and issues with their buyers not being able to sell an existing home or qualify for favorable mortgage rates because of overly tight underwriting requirements," said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. He noted that 41 percent of respondents to a special questions section of the HMI indicated they had lost sales contracts due to buyers' inability to sell their current homes.

"The uncertain economic climate and concerns about job security are discouraging many potential buyers from exploring a home purchase at this time," said NAHB Chief Economist David Crowe. "While buying conditions are very favorable in terms of prices, interest rates and selection, consumers are worried about what the future will bring, and builders are echoing those sentiments in their responses to the HMI survey."

Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Two out of three of the HMI's component indexes posted marginal gains in August. The component gauging current sales conditions gained one point to 16 – its highest level since March of this year – and the component gauging traffic of prospect buyers rose one point to 13 following two consecutive months at 12. However, the component gauging sales expectations for the next six months declined two points to 19, partially offsetting a six-point gain from the last month's revised number.

Regionally, the HMI results were mixed in August. While the Northeast posted a four-point gain to 19, the West registered a one-point gain to 15, the South held even at 17 and the Midwest posted a two-point decline, to 10.
Editor's Note: The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be accessed online at: www.nahb.org/hmi. More information on housing statistics is also available at www.housingeconomics.com.

55+ Builders More Optimistic About Multifamily Rentals than New Home Sales
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August 11, 2011 - Builders in the 55+ housing market are significantly more optimistic about production and demand for multifamily rental units than they are for sales of single-family homes or multifamily condos, according to the latest 55+ Housing Market Indices that are compiled quarterly by the National Association of Home Builders (NAHB).

All of the components measuring production and demand for 55+ multifamily rental units increased significantly in the second quarter of 2011 compared to the same period a year ago.
In comparison, the 55+ Housing Market Indices for single-family units and multifamily condos were largely unchanged with increases from 12 to 13 and from 7 to 8, respectively.

“Like those in other age groups, many people in the mature-market sector are hesitant to buy,” said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. “Among the factors keeping prospective home buyers on the sidelines are ongoing uncertainty about the economy and concerns about selling their existing homes. Low appraisals and tighter mortgage lending criteria are also constraining the market.”

The 55+ Housing Market Indices (HMI) for single-family homes and multifamily condos measure builder sentiment based on current sales, traffic of prospective buyers and expected sales six months in the future.
The 55+ Multifamily Rental indices measure current production, expected production six months in the future, current demand for existing rental units and expected demand six months in the future. In all of the 55+ Housing Market Indices, a number greater than 50 indicates that more builders view conditions as good than poor.

The 55+ Multifamily Rental indices showed increases from 15 to 28 in current production, from 16 to 29 in expected production six months in the future, and from 31 to 43 in current demand for existing units.
“Multifamily rentals are the strongest segment of the 55+ housing market at present,” said Nielsen. “The largest increase in a 55+ Multifamily Rental index was in expected demand six months in the future, which rose from 30 to 44,” he said. “An increase in demand is always good news, but this could also foreshadow a shortage of rental units in the future. Demand is already running ahead of production, and the continuing difficulty in obtaining credit to finance new construction could result in shortages down the road.”

Among the components of the 55+ Single-Family index, present sales were unchanged at 12, and expected sales increased one point from 17 to 18. Traffic of prospective buyers increased from 12 to 13.

The 55+ Multifamily Condo index components showed a slight increase – from 7 to 8 – in current sales. Expected sales six months in the future were unchanged at 10, and traffic of prospective buyers increased slightly from 5 to 7.

For the full 55+ HMI tables, please visit http://www.nahb.org/55HMI.

Lessons From the GDP Report: Not Much to Like

The Bureau of Economic Analysis (BEA) released the “advance” estimate of real GDP growth for the second quarter of 2011, along with revisions going back to 2003. The key points from the data are that the recession was deeper, the recovery has been weaker, and the recent soft patch has followed a more discouraging path than was originally indicated.

The Great Recession had a peak (2007Q4) to trough (2009Q2) decline of 5.1 percent in real GDP instead of a 4.1 percent decline based on the earlier data. Cumulative growth from the trough to 2011Q1 was revised down to 4.6 percent from 5.0 percent. Growth in the second quarter has pushed the cumulative gain back up to 5.0 percent, but leaves GDP still 0.4 percent below the peak level in 2007Q4. The steepest decline came in 2008Q4, with output contracting at an 8.9 percent annual rate, much sharper than the previously measured 6.8 percent rate.

Prior to the revised data, the path of GDP growth since the end of the recession had been characterized as strength in the second half of 2009, reaching a 5.0 percent annual pace in 2009Q4, followed by a deceleration and disappointing 1.7 percent growth rate in 2010Q2. The slowdown was largely blamed on the European sovereign debt crisis. Growth firmed in the second half of 2010 before disappointing again in the first quarter of this year. Political instability and attendant high oil prices, along with the disaster in Japan were identified as transitory factors contributing to the second slowdown.

The revised data show a more troubling pattern, with GDP growth peaking in 2010Q1 at 3.9 percent before beginning a more steady decline to 0.4 percent in 2011Q1. This pattern looks less like adverse reactions to isolated events and more like a fundamental problem. The second quarter growth rate of 1.3 percent is a modest improvement, but owes much to net exports and inventory investment. 

Personal consumption expenditures (roughly 70 percent of total output) slowed to a crawl while state and local government continued to subtract from growth.

We expect growth to strengthen in the second half of the year, but the headwinds are considerable. The current recovery is more fragile than previously recognized and the probability of a double dip recession has increased.

This new data brings into focus the fragility of the recovery and the importance of avoiding mistakes. The Federal Reserve has completed, according to plan, the second round of quantitative easing (QE2) and is committed to maintaining an accommodative policy stance to support economic recovery, although a QE3 is regarded as unlikely.

Meanwhile, on the fiscal policy front, events are less encouraging. The debate focuses more on austerity than new stimulus, and the debt ceiling deadlock has the potential to cause real damage by disrupting credit markets and spooking the stock market. What the economy needs right now is momentum and less uncertainty. Let’s hope the stewardship we get at the very least causes no harm.